What's Wrong with a Tax on Billionaires?
By Dr. Mark W. Hendrickson
Among the many radical economic plans offered by various Democratic presidential candidates, Senators Bernie Sanders and Elizabeth Warren have proposed an annual wealth tax on billionaires (and other "ultra-rich" Americans). Sanders has bluntly stated, "There should be no billionaires."
These proposals are hugely problematical. They probably are unconstitutional and certainly present practical difficulties. Among them, the billions aren't sitting in a bank account, but are generally tied up in large corporate enterprises. An annual forced liquidation of stock would cause potentially damaging annual disruptions to the businesses involved.
But those problems are of a more technical nature. The more serious problems are their sheer obnoxiousness and offensiveness. The three most egregious flaws with proposed "billionaire wealth taxes" are that they are ungrateful, unfair, and un-American. Read on.
As to ungrateful, the late economist Joseph Schumpeter, looking at the social transformation wrought by capitalism, once wrote, "The capitalist achievement does not typically consist in providing more silk stockings for queens, but in bringing them within reach of factory girls." Exactly.
Look at capitalism's track record: It takes many fewer hours of labor today to buy an ever-wider range of consumer products than it did just a generation ago. Millions of "poor" Americans have cell phones with far more computing power than NASA had available for putting men on the moon 50 years ago.
And who brought about this incredible enrichment of the masses? If you say, "profit-seeking corporations and entrepreneurs," go to the head of the class. The few "billionaires" among us are generally our greatest economic benefactors. They became wealthy delivering more value to more of their fellow man than the rest of us have. We should be grateful for them, instead of plotting the extinction of this rare breed.
As for unfair, whatever happened to the simple Biblical principle (see Lev. 19:15) that all citizens, whether rich, poor, or in between, are entitled to equal protection of their rights?
There are only two modes of taxation that uphold the principle of equal treatment before the law: 1) every citizen is taxed the same amount; 2) every citizen's income is taxed at the same rate. We abandoned that principle in 1913 by adopting the 16th Amendment to the U.S. Constitution. That amendment incorporated the Marxian principle of a graduated or progressive income tax—that is, different rates for different citizens. (Note: "a heavy progressive or graduated income tax" is point 2 in the 10-point plan of Marx and Engels published in the Communist Manifesto in 1848.) This is conscious and deliberate discrimination.
And what is the "right" or "just" amount of discrimination? There is no self-evident, incontrovertible principle; rather, rates are determined by who has the most votes in Washington. This is the crude principle "might makes right," i.e., there are more of us than there are of you, so we can take what we want from you.
As for un-American, the promise of the American Dream has always been that the sky is the limit, and that you don't have to be born into a hereditary aristocracy to get rich. Sadly, presumptuous political panderers like Sanders and Warren show contempt for great achievers, and have the hubris to assert that politicians, not the people who created and earned wealth, should decide how that wealth should be spent.
The proposals for billionaire wealth taxes represent the worst rather than the best in us. Yes, we have considerable economic challenges in our country, but cannibalizing the wealth creators who uplift our living standards is not the way forward.
Dr. Mark W. Hendrickson is a retired adjunct faculty member, economist, and fellow for economic and social policy with the Institute for Faith and Freedom at Grove City College.
